Eversource 2010 Annual Report Download - page 129

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The refund to CL&P, PSNH and WMECO of any damages that may be recovered from the DOE will be realized through the Yankee
Companies' FERC-approved rate settlement agreements, subject to final determination of the FERC. CL&P, PSNH and WMECO
cannot at this time determine the timing or amount of any ultimate recovery the Yankee Companies may obtain from the DOE on this
matter. However, NU believes that any net settlement proceeds it receives would be incorporated into FERC-approved recoveries,
which would be passed on to its customers, through reduced charges.
E. Guarantees and Indemnifications
NU parent provides credit assurances on behalf of its subsidiaries, including CL&P, PSNH and WMECO, in the form of guarantees and
LOCs in the normal course of business.
NU has also provided guarantees and various indemnifications on behalf of external parties as a result of the sale of SESI, formerly a
subsidiary of NU Enterprises, with an aggregate fair value amount recorded of $0.3 million. Other indemnifications in connection with
the sale of SESI include specific indemnifications for estimated costs to complete or modify specific projects, indemnifications to lenders
for payment of shortfalls in the event of early termination of government contracts, and surety bonds covering certain projects. The
maximum exposure on these items is either not specified or not material, and no amounts are recorded as liabilities. NU parent also
provided guarantees and various indemnifications on behalf of external parties as a result of the sales of NU Enterprises' former retail
marketing business and competitive generation business. These included indemnifications for compliance with tax and environmental
laws, and various claims for which the maximum exposure was not specified in the sale agreements.
In October 2010, NU issued a guaranty for the benefit of Hydro Renewable Energy under which NU guaranteed the financial obligations
of NPT under the TSA in an amount not to exceed $18.8 million. NU's obligations under the guaranty arise at the time the Northern
Pass Transmission line goes into commercial operation and expires upon the full, final and indefeasible payment of the guaranteed
obligations.
Management does not anticipate a material impact to net income to result from these various guarantees and indemnifications. The
following table summarizes the NU, including CL&P, PSNH, and WMECO, maximum exposure as of December 31, 2010, in
accordance with guidance on guarantor's accounting and disclosure requirements for guarantees and expiration dates:
Subsidiary Description
Maximum
Exposure
(in millions)
Expiration
Dates
Various Surety Bonds $ 11.8 January 2011 - June 2012 (1)
PSNH and Select Energy Letters of Credit $ 32.1 October 2011 - November 2011
RRR and NUSCO Lease Payments for Real Estate and Vehicles $ 21.4 2019-2024
NU Enterprises Surety Bonds, Insurance Bonds and Performance Guarantees $ 121.5 (2) (2)
(1) Surety bond expiration dates reflect bond termination dates, the majority of which will be renewed or extended.
(2) The maximum exposure includes $64.8 million related to performance guarantees on Select Energy's wholesale purchase
contracts, which expire in 2013 assuming purchase contracts guaranteed have no value; however, actual exposures vary with
underlying commodity prices. The maximum exposure also includes $17.5 million related to a performance guarantee of NGS
obligations for which no maximum exposure is specified in the agreement. The maximum exposure was calculated as of
December 31, 2010 based on limits of NGS's liability contained in the underlying service contract and assumes that NGS will
perform under that contract through its expiration in 2020. Also included in the maximum exposure is $1.1 million related to
insurance bonds at NGS with no expiration date that are billed annually on their anniversary date. The remaining $38.1 million of
maximum exposure relates to surety bonds covering ongoing projects at Boulos, which expire upon project completion.
CL&P, PSNH and WMECO do not guarantee the performance of third parties.
Many of the underlying contracts that NU parent guarantees, as well as certain surety bonds, contain credit ratings triggers that would
require NU parent to post collateral in the event that the unsecured debt credit ratings of NU are downgraded below investment grade.
F. Litigation and Legal Proceedings
NU, including CL&P, PSNH and WMECO, are involved in legal, tax and regulatory proceedings regarding matters arising in the ordinary
course of business, which involve management's assessment to determine the probability of whether a loss will occur and, if probable,
its best estimate of probable loss. The Company records and discloses losses when these losses are probable and reasonably
estimable, discloses matters when losses are probable but not estimable or reasonably possible, and expenses legal costs related to
the defense of loss contingencies as incurred.